Intellectual property law is good. Excess in intellectual property law is not. This blog is about excess in Canadian and international copyright law, trademarks law and patent law. I practice IP law with Macera & Jarzyna, LLP in Ottawa, Canada. I've also been in government and academe. My views are purely personal and don't necessarily reflect those of my firm or any of its clients. Nothing on this blog should be taken as legal advice.

Friday, May 03, 2013

CBC Fails to Obtain Security for Costs Order Midway Through Leuthold’s Appeal

On November 18,
2012 I wrote aboutthe
curious case of Ms. Catherine Leuthold, an American gardener and photographer,
who believes that she is entitled to about $21.5 million in damages because the
CBC inadvertently reused, without adequate clearance, some of her still photos
from 9/11. At trial, she was awarded $19,200. However, she is on the hook for an enormous amount of costs
because she turned down an offer for a higher amount than the trial Court
finally awarded. She is appealing both the trial judgment and the costs ruling.
Her theory of damages is apparently predicated upon the proposition that CBC’s
transmissions from each of the its 800 or so participating affiliated stations
and Broadcasting Distribution Undertakings [BDUs] gave rise to a separate act
of infringement.

I also noted that the CBC - which is subsidized by taxpayers to the tune of
more than $1.1 billion per year – had not asked the Court for an order for
security of costs. Ms. Leuthold is not resident in Canada and such
security for costs orders are quite normal in the case of non-residents. A plaintiff can avoid such an
order if impecuniosity can be demonstrated and the Court is of the opinion that
the case has merit. Without commenting on this particular case, such orders can
be very effective at stopping speculative litigation brought by non-residents
of Canada. I have not hesitated to use this tool when necessary. And it has
worked.

So,
the CBC eventually got around on December 21, 2012
– well into the appeal process and a month or so after I raised the issue on
this blog - to asking for security for costs in the modest amount of $50,000.
It did not cross-examine on Ms. Leuthold’s affidavit resisting this motion,
which indicated that her average yearly taxable income is less than $15,000.00
US and her assets are of limited value. In the words of Noël, J.A.:

The appellant
resides in the United States. She is self-employed as a gardener on a seasonal
basis (Affidavit of Catherine Leuthold, Appelant’s Motion Record, p.1, paras. 4
and 5). She also occasionally licenses photographs which she takes (ibidem).
Her average yearly taxable income is less than $15,000.00 US and her assets are
of limited value (Affidavit of Catherine Leuthold, Appelant’s Motion Record,
p.2, paras. 6 and 8; Exhibit CL-1, Appellant’s Motion Record, p.5; Exhibit
CL-2, Appellant’s Motion Record, p.60).

The Federal Court of Appeal has concluded
that it is possible she might recover more than the original award of $19,200 and
that ordering security for costs would result in discontinuance of her appeal.
The Court refused to grant CBC’s motion for security, which is not surprising
under all the circumstances and at this late date. However, why CBC did
not seek such an order at the beginning of this proceeding is not
apparent.

Interestingly,
the Court makes a very pointed observation:

[7]
Amongst the questions in issue on appeal is whether a communication to
the public for purposes of the Copyright Act, R.S.C. 1985, c. C-42 takes place
when the photos are transmitted to the broadcasting distribution undertakings
or on each occasion when the broadcasting distribution undertakings retransmit
the photographs to the public (Amended Notice of Appeal, Appellant’s Motion
Record, pp. 85 and 86, paras. II and III). The number of instances when the
appellant’s copyright was infringed turns on this question (Motion Record,
Reasons, p. 62, para. 105).

[8]
While I do not believe that the appellant can seriously envisage
obtaining an award of the magnitude which she claims, I am unable to
conclude that the issue raised on appeal cannot lead to an award that is more
favourable to the appellant. To that extent, I am satisfied that the appeal has
been shown not to be without merit and I exercise my discretion so as to allow
it to proceed.

(Emphasis
added)

This is
hardly a victory for Ms. Leuthold. It simply means that she can continue
to pursue her quest for a $21.5 million damage award based upon a very novel
theory of liability. Clearly, the Federal Court of Appeal has already expressed
some explicit skepticism in the above passage on the likelihood of
success on this point. Whether the Federal Court of Appeal finds that there is
substantively anything more to this case than an ‘honest mistake” and
inadvertent failure by a large bureaucracy to pay for a few reuses remains to
be seen. The trial Judge apparently did not seem to think so.

So –
taxpayers will likely have to absorb all of CBC’s doubtlessly very high costs
on this case, which has been going on for years, no matter what the outcome may
be. It is difficult to see how the CBC could be able to collect its costs from
someone living in the USA on a taxable annual income of less than $15,000. If
the CBC had asked for security for costs early on, things might have been very
different.

In case
anyone was not already aware, Canadian copyright litigation is not a lottery.
One cannot necessarily expect to receive $21.5 million from the proceeds of a
lawsuit against a public broadcaster involving a mistaken re-use – or even six
such re-uses - of 18 seconds worth of still photographs in a feature length CBC
documentary, when the original license was given for $2,500.

…

If this
decision is to indeed have “significant effects in both Canadian copyright and
broadcasting law” as her counsel suggests, I suspect that it will be to remind
potentially aspiring litigants and their counsel that litigation is in Canada
is not like a lottery and Canadian judges do not hand out gigantic jackpots
like American juries sometimes do. One can normally expect that Canadian Courts
will follow the maxim as stated by Justice Scott of the Federal Court in this
case that:

Fundamentally,
the Court‘s discretion is broad but its assessment of damages must be based on
common sense.